According to the latest survey of agricultural lenders in the Seventh Federal Reserve District, farmland values increased one percent from the same three months compared to last year, and moved up two percent from the first quarter of 2018.

The survey noted that Illinois values fell for the year, while Indiana had no change and Iowa's quarterly values rose by one percent. Wisconsin properties outpaced its neighbors with a four percent increase. This marks 12 consecutive quarters that Wisconsin
properties have gone up.

However, the latest questionnaire of 177 rural bankers noted that agricultural credit conditions for the district did slide during the three month period.

"Repayment rates for non-real-estate farm loans were lower in the second quarter of 2018 than a year earlier," said Reserve Economist David Oppedahl. "The proportion of the district's agricultural loan portfolio reported as having repayment problems
increased some from a year ago, reaching mid-year levels not seen since 2002."

Oppedahl says higher rates than a year ago for renewals and extensions of non-real-estate farm loans were reported by the bankers once more. For the April through June period of 2018, demand for non-real-estate farm loans was up from a year
earlier--marking the 19th straight quarter of stronger loan demand relative to a year earlier. Nonetheless, the bank survey indicated that agricultural land values remained fairly steady, assisted by an upturn in corn and soybean prices.

"Given lowered farm income projections, anticipating declines in agricultural land values would not be out of order," Oppedahl said. "According to an asset valuation model, the present price of an asset (such as farmland) should reflect both current profitability
and expectations for discounted future earnings. The discount factor should move in the opposite direction of interest rates, such that higher interest rates tend to lower asset values and vice versa."

Looking ahead, the bankers indicated that agricultural land values were expected to be stable in the short term. With 22 percent projecting agricultural land values to decrease and only two percent projecting them to increase, around three-quarters of
responding bankers projected no change in them for the third quarter of 2018.